{"id":122855,"date":"2021-08-03T10:17:04","date_gmt":"2021-08-03T04:47:04","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=122855"},"modified":"2021-08-11T14:05:40","modified_gmt":"2021-08-11T08:35:40","slug":"our-bankruptcy-code-deserves-credit-for-what-it-has-achieved","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/our-bankruptcy-code-deserves-credit-for-what-it-has-achieved\/","title":{"rendered":"Our bankruptcy code deserves credit for what it has achieved"},"content":{"rendered":"<p><strong>Source<\/strong>: <a href=\"https:\/\/epaper.livemint.com\/Home\/ShareArticle?OrgId=28e5b5e3c6&amp;imageview=0\">Live Mint<\/a><\/p>\n<p><strong>Synopsis: <\/strong>An examination of the IBC\u2019s record on resolving cases of business insolvency reveals greater success than critics acknowledge<\/p>\n<h5><strong>Background<\/strong><\/h5>\n<p><strong>Analysis of IBC\u2019s performance<\/strong>: Added points<\/p>\n<ul>\n<li>A good insolvency system cannot be judged by the number of companies being liquidated.<\/li>\n<li>Because the purpose of insolvency law is to swiftly liquidate firms that have had value erosion and stand a low chance of survival.<\/li>\n<li>For instance, Germany is known for its efficient insolvency system despite a very high liquidation ratio.<\/li>\n<li>Even in the UK and the US, where the insolvency regime is well-developed, the number of companies being liquidated is higher than in India.<\/li>\n<li>According to data from the ministry of corporate affairs, there are nearly 1.35 million active companies in India, with 6,893 under liquidation as of 31 March 2021.<\/li>\n<li>After the coming into force of the IBC, liquidations can take place under the Companies Act, 2013, or the IBC.<\/li>\n<li>Under IBC, only 26% of the IBC-referred firms have gone for liquidation.<\/li>\n<li>Of the 1,270 liquidations ordered under the IBC, 944 were already defunct or BIFR cases (i.e. 74%) till 31 March 2021.<\/li>\n<li>Of the non-defunct 318 companies, 170 did not receive any resolution plan.<\/li>\n<li>This could be for reasons such as unviable business models, no market for their products, or just lack of a well-developed market for such assets to be bought and turned around.<\/li>\n<li>There was also another set of companies that received up to six resolution plans, but none was found suitable in the commercial wisdom of the committee of creditors (CoC).<\/li>\n<li>In fact, there are companies such as Raman Ispat Pvt Ltd and Infinity Fab Engineering, which were defunct but their resolution plans received value greater than the admitted claims.<\/li>\n<li>Examining details of the 363 companies yielding resolution under the IBC until 31 March 2021, it is observed that 123 of them were defunct or with the BIFR.<\/li>\n<li>The total realizable amount by financial creditors was 34% of their admitted claims, even in these companies. Their financial creditors actually realized 160% of the liquidation value.<\/li>\n<\/ul>\n<h5><strong>Other reasons that hamper realisation of recovery rate: Added Points<\/strong><\/h5>\n<ul>\n<li>The lack of a developed market for distressed assets can help discover competitive prices for companies.<\/li>\n<li>There is a dearth of resolution applicants ready to take on the challenge of turning around a distressed company.<\/li>\n<\/ul>\n<h5><strong>Conclusion:<\/strong><\/h5>\n<p>In a short span of time, the IBC has created a discipline in the market, formalized an insolvency framework, offered a one-stop solution for companies to undergo insolvency resolution, and created a new cadre of insolvency and valuation professionals.<\/p>\n<p>One must appreciate these nuances, which will only strengthen in the long run.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: Live Mint Synopsis: An examination of the IBC\u2019s record on resolving cases of business insolvency reveals greater success than critics acknowledge Background Analysis of IBC\u2019s performance: Added points A good insolvency system cannot be judged by the number of companies being liquidated. Because the purpose of insolvency law is to swiftly liquidate firms that&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/our-bankruptcy-code-deserves-credit-for-what-it-has-achieved\/\">Continue reading <span class=\"screen-reader-text\">Our bankruptcy code deserves credit for what it has achieved<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[8671,216,3605,869],"class_list":["post-122855","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-changes-in-industrial-policy","tag-gs-paper-3","tag-ibc","tag-insolvency-and-bankruptcy-code","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704835474},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/122855","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=122855"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/122855\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=122855"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=122855"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=122855"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}